The world is experiencing a boom in the startup industry. Since these ventures are generallystarted by a single person, it gets important for the entrepreneur to ensure that all the legal requirements to start the business are accurately complied with. When a startup is commenced by a single person it is known as a “One Person Company (OPC)”. This concept was introduced in India by Dr. Jamshed J. Irani in his report on Company Law dated 31 st May 2005. Under the Indian Company Law governed by the Companies Act, 2013, Sec.2(62) defines OPC as a company that consists of only one person as its member. This proved to be a beneficial offer for entrepreneurs whose businesses are still in the early stages of development. Erstwhile, these individual entrepreneurs just had one alternative called sole proprietorship under the Companies Act which provided less advantages as compared to OPCs. There exist several similarities between OPCs and sole proprietorship due to the basic reason that both forms of businesses involve just one director. However, there exist several differences between both. The most important is that where sole proprietorship makes the proprietor personally liable for the debts, OPC does not make the entrepreneur personally liable for the debts because of the separate legal entity provided to an OPC. A sole proprietorship dies with the owner since it does not have a distinct identity from its owner, however, the concept of OPC allows the owner to elect a nominee who shall be the owner in case the owner dies.
The process of registration of an OPC is simpler as compared to other forms of businesses. The process can be understood by following the below mentioned steps:
Identity proof along with the address proof is required in order to obtain the Digital Signature Certificate (DSC) because an OPC can be incorporated only by a natural person who is an Indian citizen and resident of India.
A set of names has to be proposed to the MCA for approval. The names submitted must be legal and not similar to the already registered LLPs or companies.
Once the approval is received from MCA, an application along with self-attested MOA and AOA needs to be submitted for the incorporation of the OPC.
Here, the owner must mention a nominee, who will take over the business in case of owner’s death or inability to run the business. Upon being satisfied with the requirements in the application submitted, the Registrar of Companies (ROC) approves the incorporation of the said OPC.
Now, the OPC has to open a current bank account for the OPC and after investing the capital as specified in the memorandum, the OPC may file for a commencement certificate with the MCA.
Due to the sharp rise in the number of startups in India, in order to motivate these startups to register their startups, the MCA has announced zero fees for incorporation of OPCs along with simplifying the process.
Therefore, the concept of One Person Company has helped in revolutionize and introduce new concepts which were not identified by the Companies Act previously. It has helped the entrepreneurs to stay out of danger by providing the concept of limited liability which was not offered by the sole proprietorship.
